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Mini-Practice Set 2Merchandising Business Accounting CycleThe Fashion Rack
The Fashion Rack is a retail merchandising business that sells brand-name clothing at discount prices. The firm is owned and managed by Teresa Lojay, who started the business on April 1, 2019. This project will give you an opportunity to put your knowledge of accounting into practice as you handle the accounting work of The Fashion Rack during the month of October 2019.
INTRODUCTION
The Fashion Rack has a monthly accounting period. The firm’s chart of accounts is shown below. The journals used to record transactions are the sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Postings are made from the journals to the accounts receivable ledger, accounts payable ledger, and general ledger. The employees are paid at the end of the month. A computerized payroll service prepares all payroll records and checks.
INSTRUCTIONS
The Fashion Rack
Chart of Accounts
Assets
Revenues
101
Cash
401
Sales
111
Accounts Receivable
402
Sales Returns and Allowances
112
Allowance for Doubtful Accounts
Cost of Goods Sold
121
Merchandise Inventory
501
Purchases
131
Supplies
502
Freight In
133
Prepaid Insurance
503
Purchases Returns and Allowances
135
Prepaid Advertising
504
Purchases Discounts
141
Equipment
Expenses
142
Accumulated Depreciation—Equipment
611
Advertising Expense
Liabilities
614
Depreciation Expense—Equipment
203
Accounts Payable
617
Insurance Expense
221
Social Security Tax Payable
620
Uncollectible Accounts Expense
222
Medicare Tax Payable
623
Janitorial Services Expense
223
Employee Income Tax Payable
626
Payroll Taxes Expense
225
Federal Unemployment Tax Payable
629
Rent Expense
227
State Unemployment Tax Payable
632
Salaries Expense
229
Salaries Payable
635
Supplies Expense
231
Sales Tax Payable
638
Telephone Expense
Owners Equity
644
Utilities Expense
301
Teresa Lojay, Capital
302
Teresa Lojay, Drawing
399
Income Summary
Page 500
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